Qualified Plan Includes PRIME- Pre-tax Healthcare Retirement Funding

COMBINED QUALIFIED PENSION PLAN
CONCURRENT OFFSET, AGGREGATED BENEFITS & POST RETIREMENT
MEDICAL BENEFITS UNDER IRC §401(H)
FINEX WEALTH MANAGEMENT, INC.
An Independent Tegrit Group Affiliate
BARRY M. FINE
SENIOR FINANCIAL ADVISOR
1201 Broadway, Suite 803
New York, NY 10001
631.513.8822
An Independent Advanced Financial Strategies, Inc. Group Affiliate
*****

Tax Planning Tips
o If needed, double the otherwise maximum tax deduction for 2013
o Excess loss carry back or carry forward.
o IRC § 404(a)(6) allows a cash basis tax payer to set-up Combined
Plans and/or add-on plan, now in 2013, and double the otherwise
maximum contribution/tax deduction, as long as, the plan is
funded on a timely basis.
COMBINED QUALIFIED PLANS

THE PURPOSE OF THIS PRESENTATION
o TO FAMILIARIZE YOU WITH COMBINED PLANS AS AUTHORIZED BY
THE PENSION PROTECTION ACT (PPA) OF 2006
o TO ASSIST YOU IN PLACING CLIENT ASSETS UNDER YOUR
MANAGEMENT.
o TO GROW AND PROTECT CLIENT ASSETS
o THE MAXIMUM TAX DEDUCTIBLE CONTRIBUTIONS ALLOWABLE
FOR OWNERS WITH THE LOWEST POSSIBLE PLAN COST(S)
o ALL OF THE CREDITOR PROTECTIONS AFFORDED QUALIFIED
PLANS UNDER FEDERAL LAW AND STATE LAWS i.e. 2005 BAPCPA*
*Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
TO GIVE YOU A COMPETITIVE ADVANTAGE

THE “GOLDEN RULES”
OF PLAN DESIGN
THERE ARE 3 MAIN “GOLDEN RULES”
 MEETS THE CLIENT’S OBJECTIVES
 MAKE SURE THE PLAN IS COST EFFECTIVE
 MAKE IT EASY TO UNDERSTAND
WHAT IS THE BEST STARTING POINT FOR A PLAN
DESIGN?
MAXIMIZE OWNER BENEFITS - MINIMIZE PLAN COSTS

THE COMBINED QUALIFED PLAN
FIVE CONTRIBUTION COMPONENTS
1. The 401(k) Plan
2. The Profit Sharing Plan
 25% of eligible compensation ($255,000 in 2013)
 6% of eligible compensation (service entities <25 participants)
3. The Pension Plan
 IRC § 412(e)(3), Traditional or Cash Balance
4. The Aggregated Benefit IRC §401(h)/Life Ins.
ALL CAN BE FUNDED 100%

2013 Estimated Maximum Contributions*
Age 401k only 401k P/S Combined Qualified Plan
60-65 $23,000 $56,500 $300,000 - $450,000
55-59 $23,000 $56,500 $250,000 - $325,000
50-54 $23,000 $56,500 $200,000 - $275,000
45-49 $17,500 $51,000 $150,000 - $225,000
40-44 $17,500 $51,000 $125,000 - $200,000
* Inclusive of spousal benefits where applicable
ALL CAN BE FUNDED 100%

* §1.401(a)(26)-5(a)(2); 401(a)(26) = Minimum Participation Requirements
** the 40%/50 employee rule in 401(a)(26)
CROSS TESTING, CONCURRENT OFFSETS & AGGREGATED
INCIDENTAL BENEFITS
Keys to Max Contributions & Min Plan Costs
 The Key to the Combination Plan Designs is doing it in a non-
discriminatory manner while satisfying IRC Sec 401(a)(26).
 Cross Testing one plan with another establishes that the benefits at retirement
from both plans are essentially “equal in value” at the plan’s NRD.
 Satisfying the Concurrent Offset Rules* allows us to create a “targeted
employees only plan”. We can count participants for testing who are fully
offset on a non-discriminatory basis.**
 Aggregated Incidental Benefits allow us to increase the maximum pension
contribution up to 133% of the otherwise maximum contribution. The AIB is a
$$$ benefit that can be individually allocated as a 401h benefit, a life
insurance benefit or a combination of the two at the discretion of the
participant.

* §1.401(a)(26)-5(a)(2); 401(a)(26) = Minimum Participation Requirements
** the 40%/50 employee rule in 401(a)(26)
CASH BALANCE PLAN FUNDAMENTALS
o It looks like an old fashioned savings account
o Accounts are credited with:
o Employer Annual Contribution Credit e.g. $1,000
o Annual Interest Credit e.g. 5% = $50
o The Retirement Value is a Lump Sum, the Cash Balance!
o For Example, $1,000/ Year @ 5% over 40 years = $126,190
o Benefits are more easily understood by the participant
o Participant receives an annual statement that shows an account
balance
o Costs are Understandable by the Plan Sponsor

IRC § 401(h) FUNDS NOT USED FOR BENEFITS REVERT TO THE COMPANY
WHAT IS IRC §401h “PRIME” or
LIFE INSURANCE Aggregated Benefit ?
• THE POST RETIREMENT INDIVIDUAL MEDICAL EXPENSE BENEFIT
• PRIME BENEFITS ARE AUTHORIZED UNDER IRC §401(h)
 A 401(h) account is a separate fund, or account, of a pension plan to be used exclusively
for retiree health benefits.
 401(h) benefits are tax deductible subject to Final Regs Sec.404(a)(3)(f)(2); fully tax
deferred and payouts are tax free under IRC Sec. 105 or 106.
 401(h) tax deductible contributions, as allocated, are subject to the annual addition limit
for Key Employees and HCEs ($50,000 in 2013)
 401(h) benefits vest at the NRD for employees who go on pay status;
employee/participants leaving prior to NRD forfeit 100% of their benefit

Concurrent Offset Method & Aggregated Benefits Utilized in Proformas
Annual Compliance Testing and Government Reporting
 Monitoring of Qualification requirements (§401).
 Contribution deductibility calculations (§404).
 Minimum Participation and Coverage testing (§410)
 Monitoring of Minimum Vesting Standards (§411).
 Monitor compliance with Definitions and Special Rules (§414)
 Annual addition of benefits and allocations testing (§415).
 Top heavy testing (§416).
 ADP/ACP testing (applicable to 401(k) plans).
 Preparation of DOL/IRS Form 5500 and related schedules.
 Preparation of Summary Annual Report for participants.
 Preparation of appropriate PBGC form (for defined benefit plans only).
The GATEWAY CONTRIBUTION @ 7.5% DOES TRIPLE DUTY, it covers the:
 Profit Sharing Safe Harbor
 Top Heavy Safe Harbor
 The Gateway @ 7.5%

Case Study
Participant Information Proposed Allocations
Name Age Salary 401(k) Deferrals Matching Allocation Profit Sharing Allocation Cash Balance Allocation Aggregated Benefit Total Allocations Employer % of Pay Life Insurance Face Amount
49 $250,000 $17,000 $5,775 $27,225 $130,800 $42,500 $223,300 89.32% $1,666,667
45 $200,000 $17,000 $5,775 $27,225 $107,700 $15,000 $172,700 86.35% $1,666,667
Owner Totals: $450,000 $34,000 $11,550 $54,450 $238,500 $57,500 $396,000 72.34% $3,333,333
59 $242,923 $22,500 $7,700 $12,146 $25,000 $7,500 $52,346 21.55% $109,777
50 $230,791 $13,000 $4,550 $11,540 $0 $7,500 $23,590 10.22% $70,762
66 $166,891 $22,500 $7,700 $13,345 $0 $7,500 $28,545 17.10% $0
Executive Totals: $640,605 $58,000 $19,950 $37,030 $25,000 $22,500 $104,480 19.08% $180,539
42 $63,011 $0 $0 $3,151 $0 $1,050 $4,201 6.67% $0
59 $65,526 $7,800 $2,730 $3,277 $0 $700 $6,707 10.24% $0
25 $29,483 $0 $0 $2,250 $0 $750 $3,000 10.18% $71,816
52 $67,804 $3,900 $1,365 $3,391 $0 $700 $5,456 8.05% $0
32 $35,035 $0 $0 $2,250 $0 $950 $3,200 9.13% $58,665
62 $109,629 $10,250 $3,588 $5,483 $0 $700 $9,770 8.91% $0
45 $54,043 $0 $0 $2,703 $0 $1,200 $3,903 7.22% $0
54 $71,892 $7,800 $2,730 $3,595 $0 $700 $7,025 9.77% $0
53 $60,000 $0 $0 $3,001 $0 $700 $3,701 6.17% $0
Staff Totals: $556,424 $29,750 $10,413 $29,100 $0 $7,450 $46,963 8.58% $130,481
Grand Totals: $1,647,029 $121,750 $41,913 $120,581 $263,500 $87,450 $547,443 100.00% $3,644,353
* Total Allocations for Staff only inlcudes Employer Allocations (does not include 401(k) Deferrals)
2012 Retirement Analysis 10.31.12 PYE
Age Salary 401(k) Deferrals** Matching Allocation Profit Sharing Allocation Cash Balance Allocation Aggregated Benefit* Total Allocations
49 $250,000 $17,000 $5,775 $27,225 $130,800 $42,500 $223,300
45 $200,000 $17,000 $5,775 $27,225 $107,700 $15,000 $172,700
Owner Totals: $450,000 $34,000 $11,550 $54,450 $238,500 $57,500 $396,000
Double-up** $0 $11,550 $54,450 $238,500 $57,500 $362,000
Double- up Totals: $34,000 $23,100 $108,900 $477,000 $115,000 $758,000
71.45%
Executive Double-up Totals $0 $39,900 $74,060 $50,000 $45,000 $208,960
19.70%
Staff Double-up Totals: $0 $20,826 $58,200 $0 $14,900 $93,926
8.85%
$34,000 deductible on calendar year basis *Policy date 9.1.12

2012 Deductions Still Available Through Tax File Extensions Only
WHO SHOULD CONSIDER Immediate 2013 Tax Benefits
A COMBINED QUALIFIED PLAN DESIGN
 Owners/professionals seeking a higher contribution/tax deduction than
the traditional 401k profit sharing maximum of $50,000 ($55,500 with
Catch-up).
 Highly profitable companies of all types and sizes.
 Successful family businesses and closely-held businesses.
 CPA and law firms, medical groups and professional firms.
 Older owners who need to squeeze 20 years of retirement saving into 5 to
10 years.
 Owners/partners looking for a way to fund a buy-sell or stock redemption
agreement on a tax deductible basis.
 Wealthy owners and professionals with charitable giving intentions
stymied by the limitations on tax deductibility.

2012 Deductions Still Available Through Tax File Extensions Only
ABOUT FINEX WEALTH MANAGEMENT, INC.
o FWM is an independent, national, fee based third party administrator
providing consulting, design and administrative services to plan sponsors and
their advisors across the United States.
o FWM partners with RIA’s, Agencies, Independent Advisors and sells any
form of investment or insurance product and renders investment advice.
o FWM members have over 40 years of experience in financial services, plan
benefits and administrative services.
o FWM plan designs are actuarially certified and come with IRS favorable letter
of determination.
o FWM provides comprehensive legal documentation, trust accounting,
recordkeeping, benefit statements, plan reporting and governmental filings.
o FWM is an independent Tegrit Group affiliate; Tegrit has been awarded the
CEFEX certification for adhering to the American Society of Pension
Professionals & Actuaries (ASPPA) Standard of Practice.

PLAN DESIGN AND PROPOSALS
AVAILABLE UPON RECEIPT OF CENSUS
BARRY M. FINE
SENIOR FINANCIAL ADVISOR
1201 Broadway, Suite 803
New York, NY 10001
631.513.8822
An Independent Advanced Financial Strategies, Inc. Group Affiliate
*****

Qualified Plan Includes PRIME- Pre-tax Healthcare Retirement Funding

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Qualified Plan Includes PRIME- Pre-tax Healthcare Retirement Funding